It would begin when the player character comes across something like the Snow Elf statue in Irkngthand - the only image of a Snow Elf before the race was forced underground and twisted into the Falmer.

You'd end up with a choice:

Genocide or attempt to re-integrate the Snow Elves into society.

Rewards (depending on which one you choose)

If you slay the Falmer, you win a powerful, enchanted Falmer sword and a suit of enchanted Falmer armor.

If you re-integrate the Snow Elves into society, then you win alliance with all Snow Elves (they will not attack you when you enter one of their lairs), and learn how to make a potion that will improve your weapon skills for two in-game hours.

I used to come up with clever signatures, then I took an arrow in the knee.

Actually, that sounds like a fairly neat idea for a mod. You could come across a group of Falmers that are trying to reclaim their heritage (or maybe they've been keeping it). The local jarl wants them wiped out because they're a threat. The Falmers want assistance in obtaining an island or something to set up as a new village and for a liaison with the holds for trade and diplomacy. If the Falmer end up on land, there could be a higher chance of attack by roving angry pitchfork mobs (and maybe it can end up like Lovecraft's The Doom That Came to Sarnath). If on an island, there's less of a chance.